California

City of Hope Auction Investigated

Courts: A grand jury looks into claims of real estate fraud involving a former executive.

A grand jury is investigating allegations that a former City of Hope National Medical Center executive rigged an auction of some hospital properties to benefit himself and others involved in the scheme.

The inquiry came to light in court documents filed June 18 in a civil suit by City of Hope against its former real estate department director, Joseph W. Rohn, and his alleged accomplices.

Los Angeles County district attorney spokeswoman Sandi Gibbons would neither confirm nor deny the existence of an investigation.

Rohn has denied any wrongdoing and is cooperating with the district attorney's office, said his criminal attorney Janet Levine. The allegations stem from a misunderstanding between Rohn and a City of Hope management team that came to power during Rohn's tenure, she said. Rohn is confident he will be fully exonerated, Levine said.

According to the civil suit, Rohn persuaded City of Hope to auction a package of 85 properties, including 29 limited partnership interests and 56 stakes in oil and gas ventures. The investments had been donated to the hospital, a nonprofit cancer center in Duarte.

Acting on Rohn's advice, the hospital accepted a bid of $288,120 from a company called K&K Oil Co. for the entire package, according to the complaint. Rohn identified K&K as the high bidder, the suit said.

In fact, the suit alleges, K&K's offer was not the highest. The suit claims Rohn influenced the hospital to accept K&K's offer because he and his wife had an interest in K&K through another company they controlled.

The suit claims Rohn hid his relationship to K&K from City of Hope as part of a scheme to defraud the hospital.

After City of Hope accepted K&K's offer, the suit claims, Rohn substituted property from City of Hope's portfolio for properties in the auction agreement. The suit said Rohn made the changes because K&K's bids on some limited partnership stakes were so low that they were not accepted by the general partners.

Specifically, the suit said, the general partners of a real estate partnership called BRV Building Interests rejected K&K's offer as 20% below market. Rather than sell to K&K, the general partners purchased City of Hope's stake in BRV themselves.

As a result of the substitutions, the suit said, K&K ended up acquiring 17 limited partnership interests and seven real property interests, in addition to the 56 oil and gas investments.

City of Hope claims that the properties moved into K&K's agreement had a market value of $725,000, substantially higher than K&K's bid for the entire package. The hospital claims it lost in excess of $1 million on the K&K transaction, which took place in 1996.

The hospital's lawsuit also claims that Rohn defrauded City of Hope by secretly acting as a broker or property manager on certain real estate deals through a second company that he and his wife controlled. The suit said the company, Tidemark Properties, received commissions on at least 14 City of Hope real estate transactions.

However, Levine said Rohn had provided "in-house" brokerage services to City of Hope from 1992 until 1998, when he was placed on administrative leave. After a new management team took over at City of Hope, there was a misunderstanding about Rohn's authority to "broker, package, sell and buy" the hospital's real estate investments, she said.

The hospital's current management team, led by former L.A. Gear executive Gil N. Schwartzberg, took charge in 1996.

John Moscarino, the civil attorney for Rohn, Rohn's wife, K&K and two people identified as minority owners of K&K, accused City of Hope of filing the civil lawsuit to dredge up evidence to support the 3-year-old criminal investigation.

City of Hope acknowledged that it contacted the district attorney's office around the time it placed Rohn on leave. However, City of Hope general counsel Glenn Krinsky called Moscarino's assertion "complete nonsense."

Krinsky said: "We're suing him because he stole money from us, as outlined in the complaint."